Hot Employment Topics - Session 1

Ninth Annual Boise Employment Law Seminar
S E P T E M B E R 2 2 , 2 0 2 1 | B O I S E C E N T R E E A S T | B O I S E , I D A H O
par s ons behle.c om
B O I S E | I D A H O FA L L S | L E H I | R E N O | S A LT L A K E C I T Y
Hot Employment Topics – Session 1
Liz M. Mellem
406.317.7240
amellem@parsonsbehle.com
Sean A. Monson
801.536.6714
smonson@parsonsbehle.com

2
85% of Employment Law Claims
Statutory Basis
Title VII –Race,
color, national
origin, gender,
pregnancy, religion
ADA
ADEA
Genetic
Information
(2008)/Veteran
Status
Retaliation
Statutory
Protected Classes
FMLA
FLSA
Common Law—
Implied in Fact
Contract
Pre-Employment
Statements
Statements During
Employment
Written
Statements
Employer
Practices
Common Law—
Public Policy
Legal Right or
Privilege (Voting)
Insisting on
Compliance with
the Law
(Whistleblower)
Legal Duty
(Jury Duty)
Refusing to
Perform an Illegal
Act

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• Quid Pro Quo – “a favor or advantage granted or expected in return
for something.”
• Supervisor or someone with the ability to impact the terms and
conditions of the victim’s employment.
• A promise of promotion, transfer, pay raise, time off etc. in return for
some sexual favor.
Sexual Harassment – What is It?

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• Hostile Work Environment – sexual conduct or gender-based
hostility that is sufficiently severe or pervasive that it creates an
intimidating, hostile or offensive work environment.
• Examples of sexual harassment:
◦ Sending suggestive letters, notes, or e-mails.
◦ Displaying inappropriate sexual images or posters in the workplace.

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• Examples of Sexual Harassment (cont.)
◦ Telling lewd jokes, or sharing sexual anecdotes.
◦ Making inappropriate sexual gestures.
◦ Staring in a sexually suggestive or offensive manner, or whistling.
◦ Making sexual comments about appearance, clothing, or body parts.
◦ Inappropriate touching, including pinching, patting, rubbing, or purposefully
brushing up against another person.

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• Examples of Sexual Harassment (cont.)
◦ Asking sexual questions, such as questions about someone's sexual history
or sexual orientation.
◦ Making offensive comments about someone's sexual orientation or gender
identity.

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LGBTQ+ Discrimination
• On June 15, 2020, the Supreme Court of the United States issued
Bostock v. Clayton County -- held that the prohibition against sex
discrimination in Title VII includes employment discrimination against an
individual on the basis of sexual orientation or transgender status.
• Client or customer preference does not permit discrimination.
◦ An employer covered by Title VII is not allowed to fire, refuse to hire, or take
assignments away from someone (or discriminate in any other way) because
customers or clients would prefer not to work with people who have a different
sexual orientation or gender identity.
◦ Employers also are not allowed to segregate employees based on actual or
perceived customer preferences. (For example, it would be discriminatory to
keep LGBTQ+ employees out of public-facing positions, or to direct these
employees toward certain stores or geographic areas.)

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• Can’t discrimination because EE does not conform to sex-based
stereotypes.
◦ For example, employers are not allowed to discriminate against men whom
they perceive to act or appear in stereotypically feminine ways, or against
women whom they perceive to act or appear in stereotypically masculine
ways.

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• Can’t require transgender EEs to dress according to sex assigned
at birth.
◦ Prohibiting a transgender person from dressing or presenting consistent
with that person’s gender identity would constitute sex discrimination.
• Bathroom usage is based on identity, not sex assigned at birth.
◦ If an employer has separate bathrooms, locker rooms, or showers for men
and women, all men (including transgender men) should be allowed to use
the men’s facilities and all women (including transgender women) should be
allowed to use the women’s facilities.

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• Misuse of pronouns can be harassment
◦ Unlawful harassment includes unwelcome conduct that is based on gender
identity.
◦ Severe or pervasive creating hostile work environment.
◦ Accidental misuse of a transgender employee’s preferred name and
pronouns does not violate Title VII.
◦ Intentionally and repeatedly using the wrong name and pronouns to refer to a
transgender employee could contribute to an unlawful hostile work
environment.
 Him instead of her; her instead of him; him or her instead of they

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Sexual Harassment Investigations
• Respond to all complaints.
• Explain the process, and emphasize retaliation is prohibited
• Set expectations
• Start by showing willingness to believe and then listen
• Separate alleged victim and harasser pending investigation –
different shifts, administrative leave.

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• DOCUMENT, DOCUMENT, DOCUMENT
◦ Step one – Get the victim’s story
 Ask the victim -- what happened, who did it, where did it happen, and when did it
happen.
 Were there any witnesses? If yes, who?
 Have the victim sign a statement – you do not want the story to change.
◦ Step two – Get the witnesses’ story
 Ask the witness – what did you see or hear, when and where did you see or hear it, who
else was present.
 Have the witness sign a statement.

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◦ Step Three – Confront the harasser
 Confront the harasser with the allegations.
 Give him or her a chance to respond.
◦ Step Four – Make a decision
 Make a decision regarding the extent to which you believe that the victim was subject to
unlawful harassment.
 You will have to decide whose testimony is more credible – the victim and witnesses or
the alleged harasser.
 The alleged harasser is not going to admit the behavior that he or she is accused of
committing.

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◦ Step Four (cont.)
 Decide on discipline for the harasser, if any – write up, suspension (with or without pay
depending on any applicable policies), termination.
 Document why you took action the action you did (who you interviewed, who you
believed, why, and why the discipline is appropriate).
 Disciplinary action goes in personnel file of accused.
 The interview summaries should go in a separate investigation file – not the files of the
victim or the witnesses.

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Independent Contract v. Employee – the Devil’s Bargain
• Paying people as independent contractors is very tempting
◦ Tax savings (they pay the employer’s portion of FICA)
◦ No overtime
◦ No workers’ compensation
◦ No unemployment insurance
◦ No minimum wage – FLSA claims
◦ No discrimination or harassment claims – generally not protected under Title
VII, ADA, ADEA etc.

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Independent Contract v. Employee – the Devil’s Bargain
• But doing so is very dangerous
◦ Penalties, back taxes, back insurance premiums, overtime, minimum wage
• Studies estimate that between 10 to 30 percent of workers are
misclassified costing billions annually in lost payroll taxes

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Tests
Different tests exist:
• Workers' compensation
• Unemployment insurance
• Tax liability
• Fair Labor Standards Act
• Title VII/ADA/ADEA
• Common law

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Tests
Because there are different tests, the same person could be an
employee in one context and an independent contractor in another
context.
Between federal and state law issues (taxes v. workers compensation)
Between state v. state issues (unemployment insurance v. workers
compensation)

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IRS 20-Factor Test
1. Instructions
2. Training
3. Integration
4. Services rendered personally
5. Hiring, supervising and paying assistants
6. Continuing relationship
7. Set hours of work
8. Full time required
9. Doing work on employer’s premises
10. Order or sequence set
11. Oral or written reports
12. Payment by hour, week, month
13. Payment of business and/or traveling
expenses
14. Furnishing of tools and materials
15. Significant investment
16. Realization of profit or loss
17. Working for more than one company
18. Making services available to general
public
19. Right to discharge
20. Right to terminate

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Post-1996 IRS Approach
Behavioral control
A worker is an employee when the business has the right to direct and control the work
performed by the worker, even if that right is not exercised. Behavioral control categories
are:
• Type of instructions given, such as when and where to work, what tools to use or where to purchase
supplies and services. Receiving the types of instructions in these examples may indicate a worker is an
employee.
• Degree of instruction, more detailed instructions may indicate that the worker is an employee. Less
detailed instructions reflects less control, indicating that the worker is more likely an independent contractor.
• Evaluation systems to measure the details of how the work is done points to an employee. Evaluation
systems measuring just the end result point to either an independent contractor or an employee.
• Training a worker on how to do the job -- or periodic or on-going training about procedures and methods --
is strong evidence that the worker is an employee. Independent contractors ordinarily use their own
methods.

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Post-1996 IRS Approach (cont’d.)
Financial control
Does the business have a right to direct or control the financial and business
aspects of the worker's job? Consider:
• Significant investment in the equipment the worker uses in working for someone else.
• Unreimbursed expenses, independent contractors are more likely to incur unreimbursed
expenses than employees.
• Opportunity for profit or loss is often an indicator of an independent contractor.
• Services available to the market. Independent contractors are generally free to seek out
business opportunities.
• Method of payment. An employee is generally guaranteed a regular wage amount for an hourly,
weekly, or other period of time even when supplemented by a commission. However,
independent contractors are most often paid for the job by a flat fee.

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Post-1996 IRS Approach (cont’d.)
Relationship of the worker and the firm
The type of relationship depends upon how the worker and business perceive
their interaction with one another. This includes:
• Written contracts which describe the relationship the parties intend to create. Although a contract
stating the worker is an employee or an independent contractor is not sufficient to determine the
worker’s status.
• Benefits. Businesses providing employee-type benefits, such as insurance, a pension plan,
vacation pay or sick pay have employees. Businesses generally do not grant these benefits to
independent contractors.
• The permanency of the relationship is important. An expectation that the relationship will
continue indefinitely, rather than for a specific project or period, is generally seen as evidence
that the intent was to create an employer-employee relationship.
• Services provided which are a key activity of the business. The extent to which services
performed by the worker are seen as a key aspect of the regular business of the company.

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FLSA – Employee or Contractor -- Guidance from DOL
In July of 2015, the DOL Wage and Hour Division issued guidance
(Administrator’s Interpretation No. 2015-1) for employers to follow in
determining who is an employee and who is an independent
contractor.
In a nutshell, the guidance makes clear that the proper test is the
“economic realities” test.
The Wage and Hour Division enforces claims for minimum wage and
overtime under the Fair Labor Standards Act.

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FLSA -- Guidance from DOL
• The economic reality of the worker’s relationship with the employer
determines whether the worker is economically dependent on the
employer (and therefore, an employee) or is in business for himself
or herself (and therefore, an independent contractor).

25
FLSA -- Guidance from DOL (cont’d.)
• No single “economic realities” factor determines whether a worker is
an employee or an independent contractor
• What matters is whether the totality of the circumstances indicates
the worker is an employee or independent contractor

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The Wage and Hour division generally considers the following factors
when determining if a worker is an employee or independent
contractor:
1. Is the work an integral part of the employer’s business?
2. Does the worker’s managerial skill affect his or her opportunity for profit
and loss?
3. Relative investments of the worker and the employer
4. The worker’s skill and initiative
5. The permanency of the worker’s relationship with the employer
6. Employer control of employment relationship

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• Work is integral to the employer's business if it is a part of the
production process or is a service that the employer is in business to
provide.
• If the work performed is integral to the employer’s business, the
worker is more likely economically dependent on the employer.

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• For example, the work of a carpenter is integral to the operation of a
construction company because the company is in the construction
business and the carpenter performs the construction on behalf of
the company.
• On the other hand, a worker engaged by the construction company
to repair its copier is not performing work that is integral to its
business.

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• Managerial skill
• This factor should focus on the worker’s managerial skill and
whether this skill affects the worker’s profit and loss.
• The issue is not whether the worker possesses skills, but whether
the skills are managerial and suggest that the worker is operating as
an independent business.

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• Managerial skills that suggest independent contractor status include
the ability to make independent business decisions, such as
deciding to make business investments or hire helpers.
• Deciding to work more jobs or longer hours is not such a business
decision.
• When analyzing this factor, it is also important to consider whether
the worker faces a possible loss as a result of these independent
business decisions.

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• Relative investment
• The worker must make some investment (and undertake some risk
for a loss) to indicate he or she is an independent business.
• Merely purchasing tools to perform a particular job is not a sufficient
investment to indicate an independent business.
• The worker’s investment must also compare favorably with the
employer’s investment to suggest the worker is an independent
contractor.

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• A worker’s investment compares favorably when:
◦ The investment is substantial and
◦ The investment is used for the purpose of sustaining a business
beyond the job or project the worker is performing.

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• Worker’s skill
• Both employees and independent contractors may be skilled, even
highly skilled, workers.
• Specialized skills, such as computer programming, do not
necessarily indicate independent contractor status.
• To suggest the worker is an independent contractor, the skills should
demonstrate that the worker exercises independent business
judgment or initiative.

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• Permanency of relationship
• A permanent or indefinite relationship with the employer suggests
the worker may be an employee.
• However, the absence of a permanent or indefinite relationship does
not automatically indicate the worker is an independent contractor.

35
• What matters is whether the impermanence is a result of:
◦ The worker’s choice (which suggests independent contractor status) or
◦ The structure of that particular industry or employer (which may indicate the
worker is an employee).

36
• Right of control
• An independent contractor typically works relatively free from control
by an employer (or anyone else, including the employer’s clients).
• This factor includes who controls:
◦ Hiring and firing,
◦ The amount of pay,
◦ The hours of work, and
◦ How the work is performed.

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• The employer’s lack of control does not automatically indicate the
worker is an independent contractor.
• An employer can still exercise control over the worker even if the
worker teleworks or works offsite.

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• To be considered an independent business, the worker must
also exercise control over meaningful aspects of the work.

39
Gig Economy Workers
• Lawsuits have exploded across the country by Gig Economy
workers – Uber and Lyft are most well known but there are
hundreds.
• State legislatures and courts are trying to respond – trend is toward
employee classification
• More and more workers working from home with COVID
• Temptation is to classify them as independent contractors because
not as connected to office space
• If you try, make sure you change the fundamentals of the
relationship

40
2018 Field Assistance Bulletin
• In 2018, the Department of Labor issued Field Assistance Bulletin
No. 2018-4 (the “Bulletin”) which “provides guidance to Wage and
Hour Division (WHD) field staff to help them determine whether
home care, nurse, or caregiver registries (registries) are employers
under the Fair Labor Standards Act (FLSA).” Bryan Jarret, Field
Assistance Bulletin No. 2018-4, U.S. DEP’T OF LAB (July 13, 2018),
https://www.dol.gov/agencies/whd/field-assistance-bulletins/2018-4.

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• The Bulletin states “[a] registry is an entity that typically matches people
who need caregiving services with caregivers who provide the services,
usually nurses, home health aides, personal care attendants, or home
care workers with other titles (collectively, caregivers).”
• The Bulletin notes: “Consistent with WHD’s longstanding position, a
registry that simply facilitates matches between clients and caregivers—
even if the registry also provides certain other services, such as payroll
services—is not an employer under the FLSA. A registry that controls the
terms and conditions of the caregiver’s employment activities may be an
employer of the caregiver and therefore subject to the requirements of the
FLSA.”

42
• Further, the Bulletin states: “A registry often performs payroll-related functions
for its clients. These functions include, for example, calculating the amount of
wages owed based on the hours worked and the previously determined rate of
pay, making the appropriate tax deductions, administering benefits that the
caregiver has requested and for which the caregiver pays, and issuing a check
or electronic deposit. If the client provides the funds directly or via an escrow
account, the registry’s performance of such payroll services does not indicate
that the registry is the caregiver’s employer.”
• Finally, the Bulletin notes: “Unlike investments in office space or payroll systems,
investments in the tools necessary for the caregiver to perform his or her
services may indicate that the registry is acting as the caregiver’s employer,
instead of simply a referral service.”

43
2019 Opinion Letter re Gig Workers
• As many as 55 million people in the United States were gig workers -
or 34% of the workforce - in 2017, according to the International
Labor Organization, and the total was projected to rise to 43% in
2020.
• In 2019, the Department of Labor issued Opinion Letter FLSA 2019-
6 (the “2019 Opinion Letter”).
• The 2019 Opinion Letter addressed the question: “Whether service
providers working for a virtual marketplace company (VMC) are
employees or independent contractors under the [FLSA]?”

44
• The DOL concluded that the virtual marketplace company
“empowers service providers to provide services to end-market
consumers” and provides a referral service between the service
providers and the end-market consumers.
• According to the 2019 Opinion Letter, “as a matter of economic
reality, [the service providers] are working for the consumer,” not the
company providing the platform.
• The 2019 Opinion Letter concluded that the service providers were
independent contractors, not employees.

45
• The 2019 Opinion Letter noted that the service providers on the
virtual marketplace, among other things, were free to work when,
where and for whom they wanted and were free to work for
competitors of the virtual marketplace company.
• They could “exit” the virtual marketplace when they chose and had
the ability to negotiate the prices paid by the consumer for the
services they performed.
• On May 5, 2021, the Department of Labor withdrew the opinion.

46
• On January 26, 2021, the Department of Labor proposed a new rule
governing the economic realities test which would rely on five factors
◦ degree of control
◦ opportunity for profit or loss
◦ amount of skill required for the work
◦ degree of permanence of the working relationship, and
◦ whether the work is a component of the company’s integrated production
process, but which would emphasize the first two factors – the degree of
control and the opportunity for profit or loss.

47
• On May 5, 2021, the Department of Labor withdrew the rule.
• Takeaway
◦ The Trump administration wanted to allow companies to classify Gig
Economy workers as independent contractors.
◦ The Biden administration appears to be trending in the opposite direction.
◦ "We are looking at it but in a lot of cases gig workers should be classified as
employees... in some cases they are treated respectfully and in some cases
they are not and I think it has to be consistent across the board." Secretary
of Labor, Marty Walsh.
◦ States are also becoming more aggressive in finding Gig Economy workers
to be employees.

48
Cunningham v. Lyft
• 2020 WL 2616302
• Federal District Court of Massachusetts
• Motion for Preliminary Injunction that Lyft drivers are employees, not
contractors under a state wage statute
◦ A request for interim ruling – Lyft drivers moved for an interim order saying
that they were employees -- have to show that you are “likely to succeed” in
your claims if the case goes to trial
• Motion was denied -- court found that they were likely to succeed but
that the harm to them was not irreparable

49
Cunningham v. Lyft
• Under relevant state wage statute, in order to be considered an independent
contractor, three factors had to be met:
◦ (1) the individual is free from control and direction in connection with the performance of the
service, both under his contract for the performance of service and in fact; and
◦ (2) the service is performed outside the usual course of the business of the employer; and,
◦ (3) the individual is customarily engaged in an independently established trade, occupation,
profession or business of the same nature as that involved in the service performed.
• Court found that Lyft failed to show that (2) was met
◦ Determining whether the services provided are outside the employer’s usual course of
business included two different inquiries – establishing what services are performed by the
worker, and establishing the “usual course of business of the employer.”

50
Cunningham v. Lyft
• Lyft argued that its core business was a “platform service,”
connecting drivers and riders.
• In its Terms, Lyft states that it “does not provide transportation
services and Lyft is not a transportation carrier.”
• Lyft said it was like other “placement services,” such as those
providing health care workers or babysitters
• Lyft said its business should be viewed as an improvement to a “taxi
stand, rather than as a taxi company.”

51
Cunningham v. Lyft
• The Court disagreed:
◦ Based on the record in front of the court, the court finds a substantial
likelihood of success on the merits that, despite Lyft’s careful self-labeling,
the realities of Lyft’s business – where riders pay Lyft for rides –
encompasses the transportation of riders. The “realities” of Lyft’s business
are no more merely “connecting” riders and drivers than a grocery store’s
business is merely connecting shoppers and food producers, or a car repair
shop’s business is merely connecting car owners and mechanics. Instead,
focusing on the reality of what the business offers its customers, the
business of a grocery stores is selling groceries, the business of a car repair
shop is repairing cars, and Lyft’s business – from which it derives its revenue
– is transporting riders.

52
Cunningham v. Lyft
• As to what services the driver provide, Lyft argued that drivers do not
provide services to Lyft but rather receive a service from Lyft by
“using Lyft’s service to provide transportation services to riders.”
• Lyft also argued, based on its contention that its business is only
“connecting” riders and drivers, that “drivers perform[ ] work that is
outside the usual course of Lyft’s business.”
• The Court disagreed
◦ But Lyft ignores that the drivers are “provid[ing] transportation services to
riders,” and that service, as detailed above, is the service for which Lyft is
being paid by riders.

53
O’Connor v. Uber Technologies, Inc.
• 82 F.Supp.3d 1133 (2015)
• Federal District Court of Northern California
• Uber brought a claim for summary judgment that its drivers were
independent contractors, not employees under a California wage
statute
• The Federal District Court of Northern California disagreed

54
• Uber argued that its drivers provide no service to Uber.
• Uber’s contented that it is not a “transportation company,” but
instead is a pure “technology company” that merely generates
“leads” for its transportation providers through its software.
• Using this framing, Uber argued that were simply its customers who
bought dispatches that may or may not result in actual rides.
• The Court that the argument was “fatally flawed”

55
• “First, Uber’s self-definition as a mere “technology company” focuses exclusively
on the mechanics of its platform (i.e., the use of internet enabled smartphones
and software applications) rather than on the substance of what Uber actually
does (i.e., enable customers to book and receive rides). This is an unduly
narrow frame. Uber engineered a software method to connect drivers with
passengers, but this is merely one instrumentality used in the context of its
larger business. Uber does not simply sell software; it sells rides. Uber is no
more a “technology company” than Yellow Cab is a “technology company”
because it uses CB radios to dispatch taxi cabs, John Deere is a “technology
company” because it uses computers and robots to manufacture lawn mowers,
or Domino Sugar is a “technology company” because it uses modern irrigation
techniques to grow its sugar cane.”

56
Case Law Takeaway
• Integrated operations doctrine is an important factor in many
independent contractor versus employee tests
• Cases were not final decisions but indicate those courts’ initial takes
were different than the Trump administration’s opinion letter that
workers in a service platform framework can be classified as
independent contractors

57
Thank You
• Liz M. Mellem
406.317.7240
amellem@parsonsbehle.com
• Sean A. Monson
801.536.6714
smonson@parsonsbehle.com

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